In Shanghai:

Shanghai's housing bust comes after a doubling of prices in the previous three years, a run-up fueled by massive speculation. With China's economy booming and Shanghai at the center of worldwide attention, investors from Hong Kong, Taiwan and elsewhere were buying as fast as buildings were going up. At least 30% to 40% of homes sold were bought by speculators, says Zhang Zhijie, a real estate analyst at Soufun.com Academy, a research group in Shanghai.

This is bad news, because it could be the first stage of a collapse of the Chinese economy, with potentially very dire results for all of us.

Have your read this in samizdata?
http://www.samizdata.net/blog/archives/008435.html

I don't think I buy the dire predictions. Short of civil war, the part of the Chinese economy that connects to the outside world would keep working - although it would probably be the only part working, I'm unsure how much of a change that would really present.

As for bank failures, that just wouldn't effect very many people. The average Chinese person doesn't have any money to put in a bank. The above average Chinese person refuses to put money in the bank - that's why they have financed so an amazingly large portion of our debt, because they don't trust their banks, and they can't know enough to invest wisely in our markets, so they buy T-bills. (This is a crises of sorts for China, and they haven't quite figured out a solution yet)

The action that would have the largest real impact would be a currency failure, where the pegging of curreny to the dollar failed. That impact would be to quickly shift production out of China (into India or Malaysia) - maybe short term price increases, but longer term damage is unlikely. Again, this is unlikely because the work force is so far underutilized, and the economy is so inefficient.

A civil war would have short term problems similar to the above, but longer term problems as well, depending on what happened. Lots of people would die, reguardless - never a good thing for anyone.

The big problem China faces is corruption. Corruption is the single largest contributor (has the highest correlation) to poor economies. Essentially, if I am not sure that I can keep the rewards of my labor, why should I work? The other side to this is the group focus of eastern societies (compared to the individual focus of western societies). Group focused societies take from those that have to support those in need - an admirable goal, of course. The problem is that it eliminates most of the reason to work (though not all, working still makes you feel better) - and eliminates virtually all the motivation to save. Polynesian families seem to face this as well - it works well in maintaining the status quo, but does not allow the society to advance.

Didn't you follow my links, Rod?

China is another Potemkin village. Expect China to break up into fiefdoms and warlord duchies when the hits the fan. US dollar will fall temporarily which will almost destroy Europe's economy, but Europe will rebound when the US economy bounces back.

Kim of NK will fall, and Iran's mullahs will topple. Tyranny around the world rests on Beijing's shoulders. When Beijing topples, most of the world's tyrannies will follow in short order.

John.

I disagree. The extent of China's economic transformation
is if anything understated -- light years from being
a Potemkin village and light years from being the Soviet
Union. Modern China is communist only in the sense of being
run by a communist party; but the economic change has all
been in the direction of capitalism. It's true though
that substantial hunks of the old socialist state still
remain.

Every year, what is it?, I think a million people are
released from resource-destroying state companys and absorbed
by the free market sector. There are still many millions
to go. But still in understanding and appreciating
the world we need to look at things as they are changing
and in that light China's economic transformation is
the most positive event of the last twenty-five years
and this new century.

Hundreds of million of human beings have been freed
from the most incredible poverty and human failure.
Whatever happens after -- and there is no guarantee
the future will be likewise positive -- we should be
grateful, and I am grateful, for what has already
occurred.

I don't think that China's economy will collapse as this
enormous real estate bubble bursts. I cannot know the
future of course and many things are possible but more
likely there will be a recession that will last a few years
and then China's economy will rebound. The worst impact of that
recession will be felt not in China but in places like
South Korea, Japan, and Taiwan, which have so much of their
economic fortunes tied up in exports to China.